Is it 1937 again?

There are many commentaries on David Leonhardt's article today on whether we should be raising taxes and cutting government spending, as was done in 1937. Yet I don't see anyone -- at least not today -- talking about monetary policy during 1936-7. A bit earlier, David Beckworth stepped up to the plate:

Is the Federal Reserve (Fed) making a similar mistake to the one it made in 1936-1937? If you recall, the Fed during this time doubled the required reserve ratio under the mistaken belief that it would reign in what appeared to be an inordinate buildup of excess reserves. The Fed was concerned these funds could lead to excessive credit growth in the future and decided to act preemptively. What the Fed failed to consider was that the unusually large buildup of excess reserves was the result of banks insuring themselves against a replay of the 1930-1933 banking panics. So when the Fed increased the reserve requirements, the banks responded by cutting down on loans to maintain their precautionary level of excess reserves. As a result, the money multiplier dropped and the money supply growth stalled...
The second link in this post offers the critical figure. If monetary policy is sufficiently accommodative, I do not see that we are risking a 1937-8 repeat. In 1936-7, monetary policy was not just insufficiently expansionary, it was absolutely draconian. Read this paper too. Here is Scott Sumner.
As the stimulus is pulled away, there is a reasonable chance that the Fed will be more accommodative. Remember, the monetary authority moves last.
I do not see why we are discussing this issue without placing monetary policy at the center of the analysis.

Related

I gave my thoughts on what we learned about the structure of the modern macroeconomy here: Washington Center for Equitable Growth | The Relative Efficacy of Fiscal and Monetary Policy at the Zero Lower Bound: Where Are the Goalposts, Anyway?: The Honest Broker for the Week of January 5, 2014
Now Mike Konczal gives his thoughts:

Several days ago we wrote about what we defined as the Fed's "D-Rate" - the interest rate at which the cash outflows from payments by the Fed on its Excess Reserves will surpass that cash inflows from its asset holdings, a very troubling day because as we further explained, from that point on the Fed would be "printing money just to print money." In other words, with every passing day, the Fed is getting ever closer to the point where the inflation it so very much wishes to unleash will force

By Simon Johnson
The US has a large budget deficit and a debt-to-GDP ratio that, in most projections, continues to rise over time. Some House and Senate Republicans are arguing strongly that this situation calls for large and immediate cuts to government spending, for example as part of any agreement to increase the federal government’s debt ceiling.

I've been emphasizing that the U.S. Federal Reserve has not been printing money in the conventional sense of creating new dollar bills that have ended up in anybody's wallets. Instead, the Fed has been creating new reserves by crediting the accounts that banks maintain with the Fed. Today I'd like to offer some further observations on how those reserve balances mattered for the economy historically, how they matter in the current setting, and how they may matter in the future.